Question

Lee company is a perfectly competitive firm. the market price of its output is $10. the firm is currently producing 100 units of output. at this level of output, the firm’s average total cost is $12 per unit, its average variable cost is $9 per unit, and its marginal cost is $10 per unit. on the basis of this information, what can we say?

Answer 1

Lee company is a perfectly competitive firm. the market price of its output is $10. the firm is currently producing 100 units of output. at this level of

Answer 2

Best Answer is : Lee Company is suffering a loss, but it should stay in business in the short run. Because Any firm (regardless of market structure) will maximize profit by producing and selling the quantity at which marginal revenue is equal to marginal cost.In the special case of a perfectly competitive firm,marginal revenue is equal to price.
Thus in the special case of a perfectly competitive firm, profit is maximized by producing and selling the quantity at which price is equal to marginal cost.This firm’s price of $10 is equal to its marginal cost, which is also $10.